“While Copper TcRc is expected to improve, by-product realizations are likely to remain subdued due to lower demand from the fertilizer industry. PLF of the Power business suffered due to evacuation-related issues, which are likely to be addressed significantly on easing of bottlenecks. BALCO’s surplus power is likely to shrink in the interim, as the 325ktpa smelter is expected to ramp up ahead of the 1,200MW CPP expansion. The factory license for the 1,200MW expansion is under temporary suspension. BALCO’s coal block has received stage-II forest clearance, but the mining lease is yet to be signed. VAL is considering reviving its 1.25mtpa phase-II smelter in view of improved metal prices and subdued merchant power rates. We remain skeptical because sourcing large quantities of third-party alumina is challenging. Zinc business (both India and international) is expected to remain strong. In India, growth in mine production will drive volume growth and earnings.”

“The merger with Sesa Goa is awaiting approvals from the Madras and Goa High Courts. On merged entity basis, the stock is trading at 5.6x FY15E EPS, 0.6x FY15E BV and at an EV of 4.9x FY15E EBITDA. Maintain Buy,” says Motilal Oswal research report.

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